Trump Says Fed Politicized Rates by Consulting Economy
President Donald Trump accused the Federal Reserve on Friday of corrupting monetary policy with inflation data, labor statistics and other partisan numbers rather than asking him which interest rate would feel nicest. The complaint followed the board’s 9-3 vote to hold its benchmark rate at 3.5% to 3.75%, a decision officials reached through the controversial practice of examining the economy before announcing what it should cost to borrow money. Kevin Warsh joined the majority, while Beth Hammack, Neel Kashkari and Lorie Logan supported a quarter-point increase because inflation remained above the Fed’s 2% target.
Trump praised Warsh as “fantastic” but said the broader board had allowed economics to interfere with presidential preference. “Nobody understands interest rates like I do, and frankly the lowest rate is always the best rate because low is better than high,” Trump said. “You ask any golfer, any builder, any person with numbers, and they’ll tell you that. The board is making rates political by not doing exactly what I politically demand.” Administration officials said the statement established a crucial distinction between political pressure, which comes from economists reviewing evidence, and objective analysis, which comes from Trump wanting cheaper loans.
White House aides outlined a modernization plan under which future rate decisions would follow three rigorous steps: Trump names a number, staff members describe the number as unprecedented, and the Fed publishes it beside a chart showing prosperity beginning at the precise moment he said it. Bond markets would retain an advisory role by reacting afterward and accepting responsibility for any consequences. The proposal would preserve Federal Reserve independence by freeing the central bank from price stability, employment conditions, market expectations and every influence other than the president’s immediate preference.
Warsh has pledged to maintain the Fed’s 2% inflation target, although administration officials clarified that 2% is merely an establishment opinion promoted by people who insist percentages must correspond to measurable quantities. Trump instead favors inflation that is “very low, maybe zero, but tremendous,” a target economists can achieve by making borrowed money extremely cheap and firmly instructing prices to behave. The Federal Reserve politicized interest rates by refusing to obey a politician.
* None of the quotes in this article were spoken by an actual person. More info.